You may know this, but for other readers of this forum that may not...
1st thing is to clear your debt (other than home mortgage). What good is it to get a 10% return when you are paying 15% interest rate on debt (credit cards, student loans, car payments, etc)?
Next, maximize whatever 401K advantage you can from your employer. Some employers match a % of your 401k investments in one way or another - make sure you are taking full advantage of this. For example: My employer matches the first 4% of my total income that I contribute to my 401k. That's free money. so, If I elect to contribute 9% of my paycheck to my 401k, then I actually contribute (9% + 4% company match), or the equivlaent of 13% of my pre-tax pay. Plus, 401k is a pre-tax investment. This means you get to invest it prior to taxes being withheld. It's a longterm investment for retirement, so you can't pull it out early (59.5 years old) without penalty, but if your goal is saving for retirement (and it should be) then this is the best way to start. The most you can save through this plan is ( I think) $17,000 per year. Try to hit that max. This is in essence shifting the old idea of pension plans to the employee's responsibility. Start when you are in your 20's and this account will amaze you by how fast it compounds and grows.
After you max out your 401k, my opinion is that you take advantage of IRA accounts (Roth or Traditional). Both of these options are for retirement savings, and give you significant tax benefits. I cant remember off the top of my head what the numbers are exactly, but you can contribute around $5k per year into this account. A Roth IRA is made with after-tax money, but all transactions made within the account as well as withdrawl's from the account are usually tax free. A Traditional IRA is tax deferred, in that you only pay taxes when you withdrawl money from the account.
Once you have fully taken advantage of these opportunities to smartly and (relatively) safely save and build your retirement assets, then you can (again this is my opinion) look towards individual investments. Personally, I would forget about being a Gordon Gecko - you will never know more than the Wall Street analysts about picking stocks. Instead, find a well balanced fund that you can invest in that will diversify your money across multiple options such as large caps, small caps, real estate, international stocks, and bonds. I use a mainstream investment account for this (Merril Lynch, Morgan Stanley, UBS, Wells Fargo, etc.)
Naturally, you will want to build a readily accessable emergency fund for life's curve balls (ie lost job). This is recommended to be enough cash to get you through 6-12 months without a job. Keep this in a savings account that you can get to immediately if you need money.
Biggest thing is... don't get caught up trying to "keep up with the Jones's". You don't need a new car every 3 years, and you don't need to have the latest and greatest of every technology/food/brand names/designer clothing/etc. Be smart about your money & let it work for you by steadily contributing to your long term goals. The guy with the new BMW will wish he did the same when he is 80 years old & bagging groceries to keep food on his table while you are enjoying the fruits of your life's labor.
Just my opinion on all of this, of course... but it works.
